Why does inflation make it more difficult to accumulate wealth ?
First of all, why should i sweat and labor starting or running a business if i am not able to determine how much profits from that business will eventually be worth, what my costs and revenues will be. Why should i sweat to earn something that is printed in excess and is worth less with each subsequent run of the printing press.
Will the dollar i work hard to earn today be worth anything tomorrow ?
Inflation robs the lower classes of possibilities to move up.
Rising costs of education prevent the poor from realizing their full potential, rising living costs take up a growing part of every paycheck making it more difficult to save, rising house prices make it impossible or very difficult for many to own their own home.
Inflation is destructive to society as a whole, economically and socially. It destroys the work ethic, increases corruption, increases crime, lowers savings and productive investment, impoverishes the elderly (due to loss of value of their savings +inadequate cost of living adjustments to pensions), lowers living standards, leads to a moral decline, changes mentality from hard work to get-rich-quick.
Inflation is a stealth tax, it is a theft of wealth and theft of opportunity.
It is very unfortunate that many people ( including greenspan ) confuse inflation with wealth.
Inflation does not create wealth. At best, the wealth is transferred ( in real estate assets ). Often it is destroyed ( cash and bonds).
If your house triples in price due to inflation, no new wealth has been created because you cannot sell that house and purchase three similar ones. Only if you own several properties that you can unload, you are richer. But in this case you are richer because wealth has been transferred to you from the buyer, but still no net new wealth has been created. |
